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What's the difference between manufacturing overheads and general ones?

by , 01 September 2014
When it comes to your company's manufacturing costs, it's easy to lose track.

When you have to buy raw materials and pay this person, then that parson it can get complicated.

But on top of that, you then need to know what classifies as a manufacturing overhead and what a general overhead is.

This is something that confuses business owners and, as a result, they put the wrong costs in the wrong place.

To ensure this doesn't happen when you try to budget for these expenses, today we're explaining the difference between your manufacturing overheads and general overheads.


This is what your manufacturing overheads are

Manufacturing overhead costs relate to manufacturing the final product. The only exceptions are direct materials, direct labour, sales cost, general and administrative costs.
So, for example, a manufacturing overhead may be the cost of maintaining the machinery your company uses to make goods.
But then when do general overheads come in?
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Your general overheads includes the following

General overheads are costs that aren't included directly in the manufacturing process. Electricity is an example of such a cost. This isn't a manufacturing overhead cost. Neither are rent for office space, advertising or administrative costs. These are simply general overhead costs.
The reason is they don't directly affect your manufacturing process and you don't use them exclusively for manufacturing.
After all, you need to pay electricity, rent and advertising to run your company as a whole so you can't specifically link them to manufacturing.
There you have it! Ensure you don't get these different overheads mixed up or they may throw off your budgeting. Create different budgets for manufacturing and general expenses to control the different overheads separately. 

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